REUTERS
CHINA'S IQ
(INNOVATION QUOTIENT)
TRENDS IN PATENTING AND THE GLOBALIZATION OF CHINESE
INNOVATION
“INNOVATION IS A KEY COMPONENT
OF OUR BUSINESS STRATEGY … THERE
IS NO BUSINESS STRATEGY WITHOUT
INNOVATION AND NO INNOVATION
WITHOUT BUSINESS STRATEGY.”
-Terry Gettys, EVP of R&D
Michelin
TABLE OF CONTENTS
INTRODUCTION & BACKGROUND..................................................................... 4
GENERAL CHINESE PATENTING TRENDS......................................................... 5
Quantity of inventions........................................................................................... 5
Quality of inventions..............................................................................................7
PATENT LITIGATION IN CHINA...........................................................................10
Patent Right Enforcement...................................................................................10
Foreign Party Treatment....................................................................................... 11
Geographic Differences........................................................................................ 11
Comparison of Technical Sectors........................................................................ 12
CHINA LOOKING OUTWARDS........................................................................... 13
International Filing by Chinese Organizations......................................... 13
International Filing in Asia...................................................................... 14
Top Technology Areas for Foreign Filings............................................... 15
Top International Filing Chinese Companies.......................................... 16
Where the Top 10 File.............................................................................. 17
GLOBALIZATION OF CHINESE CORPORATIONS: CHALLENGES................... 18
Globalization Strategy: General Considerations................................................ 18
Challenges of Globalization................................................................................ 18
Global Best Practices: IP and Business Strategies........................................... 20
Global Best Practices: When to File Internationally......................................... 20
Best Practices and Views from Chinese Sources................................................ 21
1. Government: Guangdong Intellectual Property Office.......................... 21
2. Corporate: Huawei.................................................................................. 22
3. Corporate: GREE Electric....................................................................... 23
4. Corporate: Beiqi Foton Motor Company............................................... 24
5. Law Firm: CCPIT..................................................................................... 25
HOW THOMSON REUTERS CAN HELP............................................................ 26
THOMSON REUTERS
3
INTRODUCTION AND
BACKGROUND
Intellectual Property is a central plank of China's
national strategy as it pushes to become an
innovation-driven economy. Effective IP protection
is also necessary for China to successfully continue
on that journey. Although there is recognition
at the national level of the importance of IP, this
does not always translate down to the enterprise
level. Major Chinese corporations are making
strides in embracing and using IP as an integral
part of their business strategy as they seek to drive
revenue growth, gain market share and deliver
cost benefits through the protection of innovative
technology. But as data in this report shows, this is
still the exception rather than the rule.
This document is the fourth in the continuing
series “Patented in China,” which aims to
provide insight and understanding of China
as an emerging global economy and how that
growth is being driven by attempts to harness
the tremendous potential of human and natural
resources through innovation and the global IP
system.
The first report, “Patented in China: The Present
and Future State of Innovation in China,” was
published in 2008. We examined the emerging
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innovation landscape and drivers behind growth
in innovation at that time, as well as identified
techniques for monitoring future trends.
We then produced a sequel to that report in 2010,
which updated the trends and observations of the
original version based on analysis of more recent
data. We also provided additional insight into
alternative IP rights in China and an analytical
assessment of the quality of Chinese patenting.
The third report, “Chinese Patenting: Report on
the Current State of Innovation in China,” was
published in 2011. In addition to providing updated
analyses of findings in previous reports, we
focused on the development of Chinese innovation
in specific technology areas and reviewed the
fledgling trend of globalization.
This current report provides updated analysis and
commentary on the innovation landscape covered
in previous reports, and also offers insight into
the litigation environment in China, as well as
challenges Chinese corporations face – and best
practices they follow – as they seek to expand
their operations and markets in the global arena.
GENERAL CHINESE PATENTING
TRENDS
Quantity of Inventions
China continues to overshadow other countries in
the volume of its patent applications published
each year.
Chart1:1:
Chart
INVENTIONPATENT
PATENTAPPLICATIONS
APPLICATIONS
2007-2013
INVENTION
2007-2013
700,000
CN
600,000
US
JP
500,000
WO
400,000
EP
KR
300,000
TW
200,000
DE
100,000
IN
0
2007
AU
2008
2009
2010
2011
2012
2013
Source: Derwent World Patents Index® and Thomson Innovation®
Chart 1 shows the volume of published invention
applications (excluding utility models and designs)
from 2007 to 2013 for China compared to other
major global patenting regions.
The growth in output is driven by the 12th Five-Year
Plan and the associated Chinese National Patent
Development Strategy (2011-2020), which outlines
specific patent targets including the goal that
“by 2015 the annual quantity of applications for
patents for inventions, utility models and designs
will reach two million.” At current run rates, China
is set to meet this target.
This is a familiar trend in China that shows no sign
of slowing.
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5
PROJECTED VOLUMES OF
INVENTION PATENT APPLICATIONS
Chart 2:
Chart 2:
PROJECTED
VOLUMES OF INVENTION PATENT APPLICATIONS
PROJECTED VOLUMNES OF INVENTION PATENT APPLICATIONS
1,000,000
CN
900,000
US
800,000
JP
700,000
WO
600,000
EP
500,000
KR
400,000
TW
300,000
DE
200,000
Projecting the current
annual volumes of
published patent
applications, China will
continue to outstrip
other regions to
produce over 900,000
invention patent
applications in 2018,
as shown in Chart 2.
IN
100,000
AU
0
2014
2015
2016
2017
2018
Source: Derwent World Patents Index and Thomson Innovation
DOMESTIC VS. FOREIGN PATENTING
Chart 3:
Chart
3:
CHINESE
INVENTION PATENT APPLICATIONS WITH DOMESTIC
CHINESE
INVENTION
PATENT APPLICATIONS WITH DOMESTIC
AND FOREIGN
PRIORITY
AND FOREIGN PRIORITY
FOREIGN
DOMESTIC
600,000
500,000
400,000
300,000
200,000
100,000
0
2007
2008
2009
2010
2011
Source: Derwent World Patents Index and Thomson Innovation
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2012
2013
The surge in
innovation that we see
is increasingly being
driven by domestic
entities. From roughly
parity in 2007, last
year around 80
percent of Chinese
patents originated
from China.
As Chart 3 illustrates,
this trend is now
familiar and shows no
sign of slowing.
Quality of Inventions
China saw a 16.3 percent increase in published
patent applications in 2013 compared to 2012,
a trend that has been continuing for the past
several years, driven by China’s objective of
transforming the economy from a manufacturing
base to a knowledge base – the transition from
“Made in China” to “Invented in China.” There
is, however, a question as to the quality of these
patents.
2013, according to SIPO, there were applications
for 825,136 inventions, 892,362 utility models
and 659,563 designs).1 Utility models in
particular require a lesser standard of novelty
than invention patents (they are not subject to
substantive examination; in principle it is possible
to obtain a utility model patent on the wheel) and
so are likely to be of lesser quality than invention
patents.
The perception of low quality inventions
described in Chinese patents may in part be due
to the substantial use by Chinese inventors of
the utility model and design patent options that
exist. Chinese innovation is protected roughly in
equal measure by the three available rights (in
In order to truly assess the quality of inventions,
it is better to compare like with like, so that in
the following analyses, we consider only those
inventions described in invention patents from
China and comparative regions.
TECHNOLOGY PROFILE COMPARISON
What is the distribution of Chinese invention
patent applications across different areas of
technology compared to the United States and
Japan?
In Chart 4, the top 10 technology areas by volume
of inventions in 2013 (broken down by fivecharacter Derwent manual codes) are shown
for China (orange), the United States (blue) and
Japan (red).
Chart 4:
CHINESE
INVENTION PATENT APPLICATIONS
Chart
4:
COMPARED
TO U.S.PATENT
AND JAPAN
CHINESE
INVENTION
APPLICATIONS COMPARED TO U.S. AND JAPAN
Digital Information
Transmission
Polymerisation,
Polymer Chemical
Modification
Internet and
Information Transfer
60,000
50,000
CN
US
JP
40,000
30,000
Polymer Forming
Processes
Data Processing
Systems
20,000
10,000
Polymer Applications,
Other
Program Control
Alkaloids,
Plant Extracts
Pharmaceutical
Activities, General
Scientific Instrumentation,
Investigating Materials
Source: Derwent World Patents Index and Thomson Innovation
1 SIPO English website statistics at http://english.sipo.gov.cn/
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For China, the technology profile breaks
down roughly into two general areas – digital
computing/processing/communication
technology and pharma/natural product/
polymer technology. Data processing systems
top the technology breakdown followed by
digital information transmission, and Internet
and information transfer. The second main area
is alkaloids/plant extracts and pharma activities,
general.
China has a portfolio of innovation in the digital
computing/processing/communication tech
sectors comparable to those of the United
States and Japan in these technology areas.
China mirrors them in terms of its robust and
comprehensive protection by corporations and
universities. Japan has the same profile as the
United States, but at a slightly lower level.
The big difference is in the pharma/natural
products (alkaloids) sectors. China is much more
dominant in this area by volume.
This is even more apparent if we look at
China's global share of patent volumes in each
technology sector, as shown in Chart 5.
Chart 5:
Chart 5: GLOBAL SHARE OF PATENT VOLUMES
CHINA'S
CHINA'S GLOBAL SHARE OF TECHNOLOGY AREAS
Ph
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r
90.0%
80.0%
70.0%
60.0%
50.0%
40.0%
30.0%
20.0%
10.0%
0.0%
Source: Derwent World Patents Index and Thomson Innovation
China has nearly 80 percent of the world share
in patents for alkaloid/plant extracts and
approximately 60 percent of global share for
pharmaceutical activity, general patents.
It turns out that the alkaloids/plant extract
sector is made up of thousands of traditional
Chinese medicine patents. Moreover, these
are predominantly developed by thousands of
individual inventors with a handful of patents
each, rather than large portfolios maintained by
universities or corporate entities.
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Chinese medicines have been in use for more
than two thousand years. It doesn’t seem
unreasonable that China would want to claim the
rights to these in the largest market in the world
for this technology. But, the IP is likely to be of
a lesser quality since these are developed and
maintained by individual inventors.
In general, the quality of Chinese innovation
depends on the technology sector considered,
and the nature of the organizations conducting
that innovation.
IMPACT OF CHINESE INNOVATION
It is widely accepted that the more often an
invention is cited by later published inventions,
the more valuable that invention is perceived to
be by others. This is not a flawless measure, since
an invention may be highly cited as the wrong way
to solve a technical problem, but looking at the
forward citation rate of an invention is generally a
useful indicator of how good that invention is.
The impact of China’s innovation on later
technological developments can be measured
by looking at inventions published in 2008 in the
field of “data processing,” a major focus of interest
globally. Analysts consider the number of times
these have been cited by later published inventions
and compare that with the other major regions of
the world: the United States, Japan, Europe (as
measured by EP patents) and South Korea.
Chart 6 illustrates the average number of citations
to data processing inventions published in 2008
(the ratio of total forward citations 2008-date to
total number of inventions 2008). This shows that,
of the 13,000 Chinese invention patent applications
published in ”data processing” in 2008, later
published inventions cite these inventions on
average 1.17 times each.
Chart 6:
Chart 6:
CHINA'S GLOBAL SHARE OF TECHNOLOGY AREAS
FORWARD
CITATIONS FOR DATA PROCESSING INVENTIONS 2008
Average Forward Cites Per Invention
8
7
6
5
4
3
2
1
0
CN
US
JP
EP
KR
Source: Derwent World Patents Index and Thomson Innovation
Although far behind the United States for the same
metric (6.72 average forward cites per invention),
this citation rate compares favorably with Japan
(1.82 average forward cites), Europe (1.31 average
forward cites) and exceeds the South Korean rate
(0.76 average forward cites). Of course, language
may have some effect here, since Chinese, Japanese
and South Korean inventions will be published in
the local language and are likely to be cited only
locally, although the analysis includes citations
to all family members for each invention, so
that equivalents in English are likely to be cited
internationally if they are of significant importance.
The data seems to point to the increasing
importance and quality of Chinese invention
patents, at least in the high-tech area of data
processing.
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9
PATENT LITIGATION IN CHINA
The data and analysis in this section is
provided by Rouse, an international firm that
specializes in IP and provides a full range
of IP services and solutions from strategic
consultancy to IP management, enforcement
and commercialization, for clients ranging from
start-ups to some of the world's largest owners of
IP assets. Rouse produces the renowned China IP
Litigation Analysis service CIELA (www.ciela.cn).
This is an innovative IP litigation analysis service
developed by Rouse based on a deep statistical
analysis of more than 28,000 IP judgments
including patent, trademark, copyright and unfair
competition cases since 2006. CIELA data covers
infringement and administrative appeal decisions
from 128 IP courts in 48 cities.
The analysis below provides an overview of
the invention and utility model patents' civil
infringement landscape.2
Patent Right Enforcement
The last eight years have seen a significant growth
in the volume of patent litigation in China, as
shown in Chart 7. The number of cases filed almost
tripled from 2006 to 2013. The slow growth before
the new patent law in 2009 and the acceleration
after then suggests that the legal changes have
brought greater certainty for patent owners.
Similar growth rates are seen in decided cases,
though lagging a few years behind filings.
Chart 7
ACCEPTED
AND DECIDED CIVIL PATENT INFRINGEMENT CASES BY THE COURTS
Chart 7:
No. of Judgments
12,000
1st Instance Accepted
2nd Instance Accepted
Decided Infringment Judgments
10,000
8,000
6,000
4,000
2,000
0
2006
2007
2008
2009
2010
2011
2011
2013
Source: CIELA by Rouse
The role of the courts in mediating settlements
is significant. Almost two thirds of patent cases
conclude in this way, without a reasoned decision.
Appealed decisions count against judges in their
performance metrics and this in itself functions
as a driver of mediated settlement to end patent
disputes.
2 Trend information for acceptance rates for civil patent infringement is sourced from Supreme People’s Court (SPC) and the State
Intellectual Property Office (SIPO) data and white papers. Decided cases are estimated based on the total number of concluded
IP cases multiplied by the weightings of accepted patent cases for that same year.
Foreign party treatment, geographical differences and comparison of technical sector information has been sourced from CIELA.
Out of all cases where compensation was awarded, approximately 95 percent of the awards were statutory compensation
awards, i.e. awards in the judicial discretion up to a given maximum, now RMB 1,000,000. The analysis in this report excludes
compensation awards based on other types such as: loss of profit, illegal income and royalty income, in order to provide the
truest comparison between variables.
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Foreign Party Treatment
China is commonly perceived as an ‘unlevel
playing field’ for foreign litigants. However,
analysis of patent cases decided would suggest
otherwise, as shown in Chart 8.
Foreign plaintiffs in patent litigation win materially
more often against domestic defendants than
domestic plaintiffs do: a 75 percent win rate
against a 63 percent win rate since 2006.
Chart 8
100%
250,000
80%
200,000
60%
150,000
40%
100,000
20%
50,000
0%
0
Foreign vs. Chinese
Chinese vs. Chinese
Foreign vs. Chinese
Win Rate
Chinese vs. Chinese
Mean Compensation (RMB)
Win Rate
WIN RATE AND MEAN STATUTORY COMPENSATION COMPARISON—
Chart 8:
FOREIGN
AND DOMESTIC PLAINTIFFS
Compensation
Source: CIELA by Rouse
The average statutory compensation award for a
foreign plaintiff also exceeds that of a domestic
plaintiff by 72 percent.
While a conclusion that Chinese courts actually
favor foreign plaintiffs should be cautiously
avoided, the data challenges common perceptions.
Geographical Differences
Courts across China are becoming more and more
experienced in handling patent litigation, with
notable variations in their outcome.
Today, patent owners should give real
consideration to enforcing their rights outside of
the ‘traditional’ venues of Beijing, Shanghai and
Guangzhou. The courts in Shandong, for instance,
have comparable average awards of statutory
compensation, but find for the patentee almost 20
percent more than do the Beijing courts.
Flexible jurisdiction rules offer alternatives as to
the venue for plaintiffs in many cases. Beijing
remains the most experienced jurisdiction
(probably the most sophisticated, as well) and
has the highest average award of statutory
compensation in China. But win rates for patentees
in Beijing are among the lowest in China, as shown
in Chart 9.
Chart 9
MEAN COMPENSATION AND WIN RATES BY PROVINCE/MUNICIPALITY
Average Win Rate
90%
80%
70%
60%
50%
40%
30%
Win Rate
20%
10%
Source: CIELA by Rouse
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Mean Compensation (RMB)
Mean Compensation
200,000
180,000
160,000
140,000
120,000
100,000
80,000
60,000
40,000
20,000
0
THOMSON REUTERS
11
Comparison of Technical Sectors
‘Lower-tech’ patent infringement cases still
dominate the landscape, with mechanical
engineering and other fields (including civil
engineering) representing almost two thirds of all
decided patent cases since 2006, as illustrated in
Chart 10. This is to be expected in a developing
economy.
Chart 10
MEAN
COMPENSATION AND WIN RATE BY TECHNICAL SECTOR
Chart 10:
100%
90%
Mechanical Engineering
80%
70%
Win Rate
Bubble size represents the number of
judgments concluded
Other Fields
60%
Chemistry
50%
Instruments
40%
Electrical Engineering
30%
20%
10%
0%
50,000
0
100,000
150,000
200,000
250,000
Mean Compensation (RMB)
Source: CIELA by Rouse
Notable in this period are both the growth in
litigation in the more complex technical fields
of chemistry and electrical engineering, and the
increase in statutory compensation awards in
the same fields, outstripping the same in other
fields. Indeed average court awards of statutory
compensation in chemistry cases exceed all other
fields by more than 37 percent. Absolute value of
the awards remains low (RMB 183,975, roughly
USD $30,000), but the trend is clearly increasing
and punitive levels of statutory compensation
– as now present in trademark law – should be
introduced in the next round of amendments to
patent law.
Chart 11
MEAN COMPENSATION TRENDS BY TECHNICAL SECTOR
Mean Compensation (RMB)
Years: 2006 -2009
Years: 2010 -2013
250,000
200,000
150,000
100,000
50,000
0
Chemistry
Source: CIELA by Rouse
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Electrical
Engineering
Instruments
Mechanical
Engineering
Other Fields
CHINA LOOKING OUTWARD
There is tremendous, rapidly growing patent
activity in China driven by domestic entities
across the full range of technology sectors. These
innovations are of comparable quality to other
global regions as measured by profile and impact
in the high-tech areas of digital computing/
processing/communication technology.
However, for China to achieve full membership
in the global innovation community, it must look
beyond national borders and compete on a global
scale with other countries. Later in this paper,
the challenges of achieving such a transition are
considered. However, for now, we look at evidence
to determine to what extent Chinese enterprises
are beginning to set their sights beyond the near
horizon.
INTERNATIONAL FILING BY CHINESE ORGANIZATIONS
A measure of the extent of globalization of
innovation is to look at the international patent
filing activity of Chinese enterprises outside the
domestic market. Chart 12 shows the foreign filing
activities for four selected patent offices (EPO Europe, JPO - Japan, SIPO - China, and USPTO –
United States) for 2013.
For each region, the number of patent applications
originating in that region (priority country),
which are published in the other three regions
respectively in 2013, are counted. For example,
for China, of a total of 33,000 patent applications
with Chinese priority published elsewhere, 10,800
were US, 3,500 were EP and 2,600 were JP.
Chart 12:
Chart 12:
FOREIGN
FILINGS BY SELECTED REGIONS
INVENTION PATENT APPLICATIONS 2007-2013
140
Filings (thousands)
120
100
JP
80
EP
60
CN
40
US
20
0
US Foreign
Filings
Chinese Foreign
Filings
EP Foreign
Filings
JP Foreign
Filings
Source: Derwent World Patents Index and Thomson Innovation
China published the least number of foreign
patent applications in 2013, with approximately
33,000 (just 5.3 percent of total Chinese patents)
compared to Japan (over 140,000 or 36 percent
of total patents) and the US (over 180,000 or 51.1
percent of total patents). The USPTO and WIPO
together account for 81 percent of China’s 2013
foreign filings.
THOMSON REUTERS
13
Chart 13:
PERCENT FOREIGN PATENTS PER REGION 2008 VERSUS 2013
Region
% filed abroad
2008
% filed abroad
2013
Difference
2008 - 2013
China
5.4%
5.3%
-0.1%
US
54.9%
51.1%
-3.8%
Japan
29.2%
36.0%
6.7%
EPO
26.5%
24.8%
-1.7%
Source: Derwent World Patents Index and Thomson Innovation
The general trend is that the United States, Europe
and China are filing less globally in 2013 than in
2008, while foreign applications originating from
Japan are increasing. From 2008 to 2013, China
shows flat growth in seeking foreign protection for
inventions. Although absolute numbers of Chinese
inventions filed abroad have grown from 13,005
in 2008 to 33,222 in 2013, overall patenting has
grown from 239,663 in 2008 to 629,612 in 2013;
while the proportion has remained at just over 5
percent.
This is one area that needs to be addressed as
China seeks to drive economic value from its
intellectual assets.
INTERNATIONAL FILING IN ASIA
Chart 14:
14:
2014Chart
PATENT
FILINGS ABROAD FOR CN, JP, KR, IN AND SG
PATENT FILINGS ABROAD FOR CN, JP, KR, IN AND SG
60
Filings (thousands)
SG
IN
40
KR
JP
20
CN
0
Chinese Foreign
Filings
JP Foreign
Filings
KR Foreign
Filings
IN Foreign
Filings
SG Foreign
Filings
Source: Derwent World Patents Index and Thomson Innovation
As shown in chart 14, very small numbers of
Chinese inventions are filed elsewhere in Asia. By
contrast, significant numbers of Japanese and
Korean inventions are filed in China. It seems that
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THOMSON REUTERS
Japan and South Korea perceive China to be an
important local market, whereas the converse does
not appear to be true.
TOP TECHNOLOGY AREAS FOR FOREIGN FILINGS
For inventions with Chinese priority which contain
patent applications published outside China in
2013, the technology sectors (as classified by the
Derwent Manual Codes to the five-character level)
were analyzed to identify the top nine technology
areas of domestic innovation for which protection is
being sought outside China, as shown in Chart 15.
Chart 15:
TOP TECHNOLOGY AREAS FOR FOREIGN FILINGS
Technology
Number of
foreign filed
inventions
Percentage of
foreign filed
inventions
Digital information transmission
6333
23.76
Data processing systems
3237
12.14
Internet and information transfer
2745
10.3
Transmission systems (general)
2061
7.73
Telephony
1661
6.23
Program control
1135
4.26
Passive displays
1131
4.24
Substrate processing for
semiconductor device mfr.
935
3.51
Electrical engineering (other)
902
3.38
Source: Derwent World Patents Index and Thomson Innovation
Four of these are the same technology areas
highlighted in the overall analysis of Chinese
innovation by technology shown in Chart 4. Note
also that all of the top technology areas here
are in the high technology areas of computing,
communications and semiconductor devices.
China’s burgeoning international presence in
Chart 16:
these high-tech industries is clearly backed up by
globalization of its IP in these areas.
Chart 16 shows where protection for this innovation
is being sought outside China. International
protection for 74.6 percent of the foreign filed top
technology areas is being sought via the PCT route,
49.8 percent directly in the United States, 22.5
percent directly in Europe and so on.
DISTRIBUTION OF FOREIGN CHINESE PATENT FILINGS
Country (region)
Total number
of foreign filed
inventions
Percentage of
foreign filed
inventions
WIPO
21630
74.6%
USA
14427
49.8%
EPO
6509
22.5%
Taiwan
4342
15.0%
Japan
3794
13.1%
South Korea
2494
8.6%
Hong Kong
1675
5.8%
Australia
1380
4.8%
India
1373
4.7%
Source: Derwent World Patents Index and Thomson Innovation
THOMSON REUTERS
15
TOP INTERNATIONAL FILING CHINESE COMPANIES
The analysis in Chart 17 shows the top 10 Chinese
companies seeking protection internationally for
their innovation and reflects the previous findings
that high-tech industries are in the vanguard of
Chinese globalization.
Chart 17:
TOP CHINESE COMPANIES SEEKING INTERNATIONAL PROTECTION
Company
Total
inventions
2007-2013
Ranking by number
of inventions filed
outside China
Percentage of
foreign filed
inventions
Huawei
33627
1
42.9%
ZTE Corp
33884
2
36.6%
Shenzhen Huaxing
Optoelectronic
2447
3
69.5%
Alibaba Group
1448
4
84.3%
BOE Technology Group
6015
5
19.6%
Lenovo
3972
6
27.5%
Tencent
4186
7
23.5%
BYD Co Ltd
7651
8
6.8%
SMIC
5482
9
9.1%
Sany
3655
10
9.5%
Source: Derwent World Patents Index and Thomson Innovation
In 2012, ZTE became the top filer at WIPO for PCT
patent applications. Huawei was fourth on the
same list.3
3 “Chinese Tech Company ZTE #1 in PCT Patent Filings” by Thijs van der Toom on October 10, 2013 at
http://www.innovativechina.com/2013/10/chinese-tech-company-zte-1-pct-patent-filings/?goback=%2Egde_3772578_
member_5794007140385435652#%21 (accessed July 12, 2014)
16
THOMSON REUTERS
WHERE THE TOP 10 FILE
Chart 18 shows the major regions where the top
10 Chinese organizations seen in Chart 17 publish
patents to seek protection for their inventions
outside China.
of magnitude more patents than the other eight
companies, so the chart is split in two to show the
relative numbers more clearly. Inventions may
be filed in more than one other region, so totals
exceed those indicated in Chart 17.
Huawei and ZTE Corp have published an order
Chart 18:
TOP REGIONS FOR FOREIGN FILING BY CHINESE COMPANIES
Chart 18:
TOP REGIONS FOR FOREIGN FILING BY CHINESE COMPANIES
30,000
3,500
25,000
3,000
US
EP
JP
KR
WO
2,500
20,000
2,000
15,000
1,500
10,000
ny
Sa
IC
SM
Lt
d
Co
BY
D
ce
nt
Te
n
no
Sh
Le
Co
r
E
ZT
Hu
aw
en
Op zhe
to n H
el u
e c ax
tro in
Al
ni g
c
ib
ab
BO
a
E
G
Te
ro
ch
up
no
lo
gy
Gr
ou
p
0
p
0
ei
500
vo
1,000
5,000
Source: Derwent World Patents Index and Thomson Innovation
THOMSON REUTERS
17
GLOBALIZATION OF CHINESE
CORPORATIONS: CHALLENGES
Globalization Strategy: General Considerations
Business is increasingly being conducted on a
global scale. The attraction of finding new markets
to generate fresh revenue, accessing highly
educated workforces with specialized skill sets
to enhance innovation, and reaching production
efficiency combined with economies of scale are
key drivers of this trend. But globalization is not
without its challenges.
There are risks in entering new territories
associated with lack of knowledge of the
local business, cultural, legal and regulatory
environment that can cause management
challenges if not planned for upfront.
For example, entering a new market by acquiring
an existing company with strong presence in
the local market of interest brings with it several
considerations – working with the local company
to understand their business, adjusting to the local
environment by understanding how local people
think and understanding their needs, and giving a
level of autonomy to the local operation to execute
strategic plans.
Challenges of Globalization
With respect to intellectual property rights,
the challenges facing Chinese enterprises in
globalizing their innovation fall into three broad
areas:
18
THOMSON REUTERS
•
Establishing protection for innovation
•
Maintaining an IP portfolio
•
Protecting IP rights
Intellectual property rights are another issue that
companies have to face when going abroad. It is
very important that all laws, especially commercial
and legal, are respected. A sound knowledge of
local laws is essential and can best be achieved by
working with regional agents because they have
the knowledge of the IP environment.
A successful globalization strategy should seek to
address questions such as:
•
What is the extent of the opportunity in the
chosen global market?
•
What is the nature and scale of the
competition in the chosen global market?
•
What is the appropriate extent of market
presence in the chosen global market?
•
How can that presence best be built?
•
What are the best locations around the world
for the various value-add activities?
•
How best should global presence be converted
into global competitive advantage?
ESTABLISHING A PORTFOLIO
There is an increasing awareness that a
comprehensive portfolio of intellectual property,
and specifically patents, can bring substantial
value to an organization. A well-constructed patent
portfolio can be used for a range of business
objectives such as protecting R&D investment,
establishing market position, generating revenue
either by direct exploitation or licensing, and
securing cross-licensing or settlement agreements.
China is the global leader in patent application
volume, but the majority of its patenting is
domestic in nature. There is a recognized need
for Chinese enterprises to develop strategies
for globalization of IP in order to increase
penetration of international markets. If Chinese
enterprises are to become truly global players,
they need to proactively build up patent portfolios
internationally to protect R&D results, mitigate
existing patent risks, and build presence and
freedom to operate abroad.
Establishing an effective patent portfolio should
form part of an IP strategy that is aligned with
the organization’s business objectives. Building a
comprehensive patent portfolio can however be
very expensive. A practical approach may be to
focus on obtaining a few quality patents initially
that cover key products and technologies that align
with a business’s strategy.
This is traditionally achieved by direct investment
in R&D and obtaining protection of resulting
innovation. But an effective portfolio can also be
built or supplemented by other means, including
licensing-in technology where appropriate (and
available), through merger and/or acquisition
with organizations holding key technology, or by
partnering with other organizations including
creation and participation in patent pools.
However the portfolio is built, it should form part
of an IP strategy that aligns with the key business
goals of the company. Clear business goals provide
a long-term blueprint to guide the development of
a valuable patent portfolio.
MAINTAINING A PORTFOLIO
Once an international portfolio is established,
there is a need to actively manage it to optimize
value, minimize risk and reduce costs. Chinese
enterprises need to strengthen management
and control of patent risks to reduce or eliminate
the adverse effects. This requires an effective
innovation and IP management system.
Effective maintenance of an IP portfolio is an
ongoing process that requires regular and
systematic attention. General best practice involves
the use of a portfolio review group that convenes
regularly to review and make decisions about
patents in the portfolio. These can include decisions
about which patents should be maintained either
for defensive purposes or as potential bargaining
chips in negotiations, or those that may be suitable
to use for generating revenue either through
licensing or disposal through sale of the assets, or
those that no longer have a purpose or value to the
organization and should be allowed to lapse.
Such a review body will generally consist of
business stakeholders including marketing, sales,
business strategy and R&D as well as legal counsel
and information decision support professionals.
Decisions about how best to utilize the protection
afforded by a patent portfolio rely on a sound and
accurate understanding of both technology and
commercial landscapes. For example, a key input
could be a map of the business that depicts the
landscape of competitive IP. Another key input is
a facilitated collaboration with business leaders,
marketers, engineers and legal counsel. There are
many sources of input that vary depending upon
the specific technology area, and the business
objectives of the company. The desired output is
an actionable strategy that aligns IP goals with the
company's overall business direction.
THOMSON REUTERS
19
PROTECTION OF IP RIGHTS
Once a portfolio has been established and an
effective process to maintain it through regular
review and active management of the assets is
in place, robust protection becomes critical to
realizing the strategic objectives of maximizing
value and minimizing risk.
That protection is achieved through actively
maintaining a watch for potential problems
through:
•
Patent landscaping to identify competitors and
technology trends
•
Patent and trademark watching to identify
potential infringement
•
Rigorous enforcement where necessary
through effective patent litigation
There is a recognition that Chinese enterprises
need to more proactively build up a patent portfolio
to protect the fruits of R&D investment, mitigate
existing patent risks, and establish and maintain
freedom to operate in chosen technology areas and
markets. This will ultimately establish and expand
core competitive advantage in these areas.
Global Best Practices: IP and Business Strategies
IP strategy should be an integral part of business
strategy and nowhere is this more true than in
developing a strategy for globalizing the business.
Competitive advantage in the market can be
gained by aligning IP strategy with technology R&D
strategy and business operation strategy through a
high level of intellectual property management.
Global Best Practices: When to File Internationally
In deciding whether to globalize a domestic
innovation, protection of the invention in
appropriate markets should be carefully considered
as an important part in achieving success in
those markets. Therefore, decisions about what
innovation should be protected, and where, need to
be based on multi-dimensional analysis:
20
THOMSON REUTERS
•
Target/potential market for product based on
claimed invention
•
Competitive landscape in target markets
•
Protection environment/culture in target
markets
Best Practices and Views from Chinese Sources
1. GOVERNMENT: GUANGDONG INTELLECTUAL PROPERTY OFFICE
The Guangdong Intellectual Property Office
(GIPO) is responsible for patent-related work and
coordination with external parties on intellectual
property matters; it also supervises the conduct
and management of the patent market as well
as promoting and providing education about
intellectual property. It conducts training programs
on intellectual property, deals with patent disputes,
and investigates and takes enforcement actions
against patent infringers.
GIPO is at the center of the drive to transform
the Chinese economy from "Made in China" to
"Created in China." Intellectual property strategy
plays an integral part of achieving this through
implementation of the "innovation-driven
development" strategy. Ultimately, the role of
intellectual property in promoting industrial
development can only be effective if intellectual
property strategy is implemented at the enterprise
level. As part of the government, GIPO is focused
on further strengthening the guidance and support
to enterprises in the following ways:
•
First, to provide support to enterprises in
building a high-quality intellectual property
portfolio and seeking protection of that
portfolio. This is a necessary prerequisite
to implementing an effective intellectual
property strategy and gaining control over core
industrial development and key technologies.
•
Second, to continue guiding enterprises to
improve intellectual property management
capabilities to meet the requirements of
sustainable and global development. In recent
years, the introduction and implementation of
enterprise intellectual property management
standards and the guidance to enterprises
for intellectual property management
standardization are important targets for
the work of State Intellectual Property Office
(SIPO).
•
Third, to support enterprises in realizing
the economic value of intellectual property
through effective management of intellectual
property assets. The government aims
to create the mechanisms and policy
environment for intellectual property
application, guidance and support enterprises
to exploit intellectual property assets,
participate in market competition and
cooperation at home and abroad by utilizing
intellectual property, and realize enterprise
development advantages.
THOMSON REUTERS
21
2. CORPORATE: HUAWEI
Huawei is a leading global information and
communications technology (ICT) solutions
provider. Through dedication to customer-centric
innovation and strong partnerships, Huawei
has established end-to-end capabilities and
strengths across the carrier networks, enterprise,
consumer and cloud computing fields. Huawei is
committed to creating maximum value for telecom
carriers, enterprises and consumers by providing
competitive ICT solutions and services. Its products
and solutions have been deployed in over 170
countries and regions, serving more than one third
of the world's population.
Since its foundation in 1987, Huawei has been
committed to independent innovation by investing
no less than 10 percent of its sales revenue in
technology R&D every year. In this way, the
company has developed core technologies as
well as core intellectual property rights. As a
result of continuous long-term investment and
accumulation, Huawei has been leading the
industry in terms of product development.
Looking to the future, Huawei aims to become
the ICT industry leader. This poses big challenges
for Huawei’s technological innovation. How can
they continuously advance technologies and
better serve customers to create more value for
them? How can they effectively adapt to changes
and achieve sustainable development under the
background of the ever-changing technologies and
customer needs? These are the questions to be
answered.
22
THOMSON REUTERS
To address these challenges, Huawei has taken the
following approach:
First, Huawei continuously invests heavily in
technology R&D. In 2013, its R&D investment
reached CNY 30.672 billion, accounting for
12.8 percent of the annual revenue. The R&D
investment totals more than CNY151 billion over
the past decade.
Second, Huawei has been attracting global talent
and established 16 research centers in countries
such as Germany, Sweden, the United States, India,
Russia, Japan, Canada, Turkey and China. About
70,000 employees are engaged in product and
solution R&D, accounting for 45 percent of the
company’s total employees.
Third, Huawei is committed to open innovation. By
cooperating with various stakeholders, it is able
to make full use of global resources and further
develop innovation created by the best universities
and research institutes in the world. In line with
the strategy of customer-centric innovation,
Huawei has established 28 joint innovation centers
with leading telecom operators and has enabled
customers to gain competitive advantage as well as
business success by providing them with cuttingedge solutions.
Last but not least, Huawei has been increasing
R&D investment in basic technology. The
establishment of the 2012 Laboratories shows
commitment to addressing the challenges brought
about by the seismic information technology
advances of the future.
3. CORPORATE: GREE ELECTRIC
Gree Corporation is one of the largest and most
innovative companies in China. Through 19 years
of development, it has established itself as a
global leader in residential and commercial air
conditioning solutions. Its trademarks of "Gree"
and "Rossini" held by the Corporation were
recognized as China's well-known trademarks
by the State Administration for Industry and
Commerce in January 1999 and February 2004,
respectively. In 2003, Gree Corporation achieved
total operating revenue of RMB 19.842 billion,
occupying 88th place among China's top 500
enterprises and 15th place among Guangdong's
top 50 enterprises.
Gree’s international filing strategy has three
considerations:
•
Determination of which inventions are
applicable for international filing
•
Timing of international patent filings
•
Selection of countries in the target markets
Precise timing of international filing is very
important so as not to provide competitive
advantage to others through early disclosure.
According to the quality of patent drafting, scope of
geographic coverage and continuation of followon R&D, Gree will determine the way to file the
application (through the Paris Convention or PCT),
as well as the opportune moment for such an
international application.
When determining specific countries in which
patents will be applied for, Gree mainly takes the
following aspects into account: product sales
territory, key competitive markets, countries
with larger consumer markets or potential ones
for patented products, countries with greater
production capacity of such products, and countries
with larger trading markets for similar products.
Gree will apply for patent protection in the
corresponding countries if one or more of the above
conditions are satisfied.
During patent application in China, patent
engineers will assess each domestic patent
application from several dimensions including the
scope of protection, patent stability and importance
of a product corresponding to the patent. They will
then determine whether to propose international
patent applications based on the strength of the
assessment results.
THOMSON REUTERS
23
4. CORPORATE: BEIQI FOTON MOTOR COMPANY
Beiqi Foton Motor Co., Ltd. (Foton) was founded
in 1996. Headquartered in Beijing’s Changping
district, Foton has registered assets of nearly USD
500 million and employs approximately 40,000
staff worldwide. Foton is an established automotive
industry leader in China. R&D facilities are located
in China, Japan and Germany. In 2012, Foton
had a gross turnover of RMB 50.867 billion and
sold over 621,000 units, making it the top-selling
commercial vehicle manufacturer in China.
When deciding on worldwide application for an
invention patent, Foton consider the following
aspects:
THOMSON REUTERS
•
When there is a clearly defined target market
in only a few countries
•
When granted patent protection is required as
soon as possible
•
When it is not possible to apply via PCT, such
as for an appearance design
There are some elements that need to be
considered when deciding on the category:
•
Application countries/regions
•
Related legal rules for target countries/regions
•
Application methods
•
•
Application categories
Planned patent technology solutions for
application
•
Whether a patent needs to be granted as soon
as possible
In determining which countries and/or regions to
file in, the following elements are considered:
24
Foton usually applies for international patents via
PCT, but will apply via the Paris Convention under
the following circumstances:
•
Target or potential market landscaping of
products that relate to technical solutions of
patent application
•
Competitors’ patent landscaping of products
that relate to technical solutions of patent
application
•
The protection environment of intellectual
property for the target countries/regions
5. LAW FIRM: CCPIT
CCPIT Patent and Trademark Law Office is one
of the largest and oldest full-service intellectual
property law firms in China. The firm has 279
patent and trademark attorneys, among whom
69 are qualified as attorneys-at-law. CCPIT
provides consultation, prosecution, mediation,
administrative enforcement and litigation services
relating to patents, trademarks, copyrights,
domain names, trade secrets, trade dress and
other intellectual property-related matters.
Headquartered in Beijing, CCPIT has branch
offices in New York, Tokyo, Munich, Hong Kong,
Guangzhou and Shanghai.
Chinese companies are increasingly aware that
in going global, patent competition depends less
on the number of granted patents than on the
effectiveness of enterprises’ intellectual property
management. That is, they can ultimately gain
competitive advantage in the market by closely
integrating their patent strategies with technology
R&D strategies and business operation strategies
through a high level of intellectual property
management.
With an increasing number of Chinese enterprises
participating in international competition in the
future, patent agencies should shift their major
business from conventional patent application
to a full range of capabilities, including: patent
search, patent application, patent mining, patent
layout, patent protection, infringement litigation,
response to announcement of invalidation, transfer
of patent licensing, patent pledge financing,
patent capitalization, patent standardization,
establishment of patent pool and due diligence.
THOMSON REUTERS
25
HOW THOMSON REUTERS
CAN HELP
The challenges of globalization of IP center on
an effective IP strategy that aligns with business
objectives. In order to develop a clear strategy, it
is necessary in turn to have a clear understanding
of the competitive, technological and legislative
landscape. Thomson Reuters IP & Science
provides a range of tools and services that can help
customers drive innovation, protect intellectual
assets and create maximum value from their ideas
by providing solutions that power the intellectual
property lifecycle.
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world’s most comprehensive and authoritative
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subject experts analyze, abstract and manually
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Thomson Innovation, one of our major brands
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Intellectual Property Management
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To find out more about our patent and IP management services in China, or to learn more about any of
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